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A real options design for product outsourcing.: An article from: Engineering Economist
	Authors: Harriet Black Nembhard, Leyuan Shi, Aktan Mehmet Publisher: Institute of Industrial Engineers, Inc. (IIE) Buy New: $5.95 as of 2/5/2012 17:14 MST details In Stock Seller: Amazon.com Format: HTML Language: English (Published) Media: Digital Pages: 20 ASIN: B0008E25M4 Publication Date: September 22, 2003 Availability: Available for download now



Editorial Reviews: Product Description This digital document is an article from Engineering Economist, published by Institute of Industrial Engineers, Inc. (IIE) on September 22, 2003. The length of the article is 5768 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser. From the author: Product outsourcing is recognized as a way to gain flexibility for competitive advantage. We formulate the outsourcing problem using real options. We develop a financial model to assess the option value of product outsourcing. Specifically, we consider a three state-variable problem and use Monte Carlo simulation to estimate the value of the option. This valuation gives decision makers a way to choose the appropriate outsourcing strategy based on an integrated view of the market dynamics. A case example from the apparel manufacturing industry is used to demonstrate the application of real options to value outsourcing flexibility. We show that the inability of classical net present value methods to address dynamics in the market condition leads to an undervaluing of the outsourcing strategy. Numerical results and sensitivity analysis show how the real options approach can be used to give a better view of the long-term value of outsourcing. Citation Details Title: A real options design for product outsourcing. Author: Harriet Black Nembhard Publication: Engineering Economist (Refereed) Date: September 22, 2003 Publisher: Institute of Industrial Engineers, Inc. (IIE) Volume: 48 Issue: 3 Page: 199(19) Distributed by Thomson Gale

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